If you shoot yourself in the foot, why shouldn't I?
Saturday, December 10, 2005
Reading this piece about the massive "trade-distorting" agricultural subsidies given out by the US and the EU to their farmers, or indeed any article in the Hindu about this subject, you would think that the developed West is hurting us a great deal through such policies. I too was a sucker for this argument, until around an hour ago, when a few comments to a post on the Indian Economy blog woke me upto reality.
This Tech Central Station article does a good job of explaining the shoddy logic and the empty rhetoric of all the protectionists, the essence of which is that:
Evil rich countries (Europe, the U.S. and Japan) refuse to cut their agricultural subsidies and tariffs, which, in the words of Oxfam, "amount to robbery against the world's poor." Noble poor countries, meanwhile, righteously refuse to dismantle their own trade barriers unless the rich countries move first.
Hence, we are told, we are to go on shooting ourselves in the foot by continuing to have tariffs and artificially increase prices just because the rich countries are doing that. But, what if, we regain our senses for a bit, and decide to unilaterally remove trade barriers?
The World Bank has found that the total gain to the global economy from trade liberalization in agriculture -- the sticking point in Hong Kong, where I'll be next week -- is $248 billion. Of this total, the gain to rich countries is $106 billion; to poor countries, $142 billion.
But out of the $142 billion gain to poor countries, the gain that comes from removing trade barriers in rich countries is only $31 billion. The gain to poor countries that comes from removing their own barriers is $111 billion -- nearly four times as great.
(Italics in original).
There is more stuff in the article that would surprise you if you did not already understand free markets. And there is no dearth of such people in this world. Given political "pro-poor" rhetoric on the one hand, and the insidious socialist propaganda of the mainstream media on the other, it is not to be wondered at.